This aerial image provided by the U.S. Coast Guard shows the Royal Dutch Shell drilling rig Kulluk aground off a small island near Kodiak Island Tuesday Jan. 1, 2013. No leak has been seen from the drilling ship that grounded off the island during a storm, officials said Wednesday, as opponents criticized the growing race to explore the Arctic for energy resources. (AP Photo/U.S. Coast Guard)

BERLIN (AP) -- Chancellor Angela Merkel highlighted Germany's economic strength as she kicked off campaigning Saturday for an important state vote that comes months before national elections, and she brushed aside worries about the weakness of her party's coalition partner. Merkel's center-right party faces a tough battle to extend its 10-year hold on Lower Saxony state, a northwestern region of 8 million people, in the Jan. 20 election there. Polls suggest the center-left opposition has a good chance of winning, which would give it a significant boost ahead of September national elections in which Merkel will seek a third term. Merkel made clear that her Christian Democrats will make "economic competence, together with jobs -- and jobs that are well-qualified and fairly paid," along with economic strength, a keystone of this year's campaigns. She identified opposition plans for tax increases as one battleground. "We believe that we do, of course, need income for the state, so we are not talking about tax cuts at this point," Merkel said at a televised news conference after her party's leadership met in Wilhelmshaven, a port city in Lower Saxony. "But we believe that tax increases ... are not good for current economic developments, for medium-sized companies in particular but also for big companies," she added. The number of Germans out of work averaged just under 2.9 million last year, the lowest since 1991. Germany's jobless rate of less than 7 percent contrasts with figures well over 20 percent in troubled eurozone partners Greece and Spain. The strong German economy, and Merkel's hard-nosed management of Europe's debt crisis, have helped keep her popularity high and her party ahead in polls. But the weakness of the pro-market Free Democratic Party, her junior coalition partner, means that her center-right alliance lacks a majority in surveys. The party, which campaigned at Germany's last election for tax cuts that it failed to obtain, has taken much of the blame for frequent coalition squabbling. In Lower Saxony, polls show the FDP short of the 5 percent support needed to stay in the state legislature, which endangers popular conservative governor David McAllister's chances of keeping his job. However, Merkel said she is "very optimistic that the (Free Democrats) will, on their own strength, with their ideas and their share in the success of the work of both the Lower Saxony state government and the federal government, be able to convince people." The Lower Saxony election follows a rough start for Merkel's center-left challenger in the national elections, former Finance Minister Peer Steinbrueck. He drew criticism this week for saying the chancellor earns too little and that Merkel has an advantage because she's a woman -- adding to earlier controversy over his high earnings from public speaking. Merkel coolly dismissed a question about her challenger's performance. "To be honest, I take care of my own performance and I'm very satisfied with that," she said. "The rest is for others to comment on."

ANCHORAGE, Alaska (AP) -- Spokesmen for Royal Dutch Shell PLC and the Coast Guard say naval architects have pronounced the oil company's drill ship sound and they're preparing for an attempt to pull it off rocks near a remote Alaska island. Shell incident commander Sean Churchfield says the Kulluk (CULL'-uck) will be moved "as soon as we are ready and able." The Kulluk ran aground New Year's Eve after breaking loose from its main tow vessel. Churchfield says a tow plan has been developed and a salvage team is on board the 266-foot diameter barge but timing will depend on weather, tides and readiness. The Coast Guard reported wind at 23 mph just before noon Saturday and 2-foot waves. The tow plan calls for 30-mile tow to shelter in Kodiak Island's Kiliuda (kill-OO'-dah) Bay.

ADDIS ABABA, Ethiopia (AP) -- The presidents of Sudan and South Sudan have agreed to the unconditional and speedy implementation of deals reached in September to demilitarize their shared border and allow oil exports to flow from South Sudan's oil fields north through Sudan's pipelines. Sudan President Omar al-Bashir and South Sudan President Salva Kiir met on Friday and Saturday in Ethiopia's capital to revive a stalled oil exportation deal that has lagged for months over disputes on the setup of security arrangements across their borders. AU mediator Thabo Mbeki told reporters late Saturday that the two presidents agreed for the "speedy, unconditional and coordinated" implementation of the agreements.

A newspaper is reporting that Flowers Foods and Bimbo are emerging as bidders for the bread brands of Hostess, which in the midst of a bankruptcy-court liquidation of its assets. The Wall Street Journal reported Saturday that Hostess Brands Inc. could reveal as early as next week that Flowers and Bimbo are in discussions to acquire the bread brands, which include Wonder Bread and Nature's Pride. The report says the brands could command $350 million. Hostess, based in Irving, Texas, announced in November that it was shutting down its business and selling its brands, which also include Twinkies, along with its 33 bakeries and other operations. Grupo Bimbo SAB's brands include Arnold breads, Thomas' English muffins, and Entenmann's cakes. Flowers Foods Inc.'s brands include Nature's Own breads and Tastykake snacks.

TEHRAN, Iran (AP) -- Iran's police chief says the Islamic Republic is developing new software to control social networking sites. Gen. Esmail Ahmadi Moghadam was quoted in Iranian newspapers Saturday as saying the new software will prevent Iranians from being exposed to malicious content online while allowing users to enjoy the benefits of the Internet. He did not say when the software would be introduced. Moghadam also did not specify which social networking sites would be affected, but both Facebook and Twitter are popular in Iran. Iranians currently have access to most of the Internet, although authorities block some sites affiliated with the opposition, as well as those that are seen as promoting dissent or considered morally corrupt. Iran created a government agency last year to oversee Internet usage in the country.

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